Wednesday, November 02, 2011

Litigation lottery

As the court explained, “bling” “is a term popularized in the hip-hop music community and is frequently used in advertisements and pop culture.” Gameologist has a registration for "BLING BLING 2002" for "entertainment in the nature of online three dice casino games" (registered 2005) and for "casino games and equipment therefor, namely board games" (registered 2010). It also has an ITU pending for, among other things, lottery cards; it hasn’t filed a Statement of Use for those goods and has requested several deadline extensions. (The registrations and ITUs were assigned to Gameologist by McGill, a founding member of the business; Scientific argued that McGill had no underlying business or goodwill to assign and has thus filed petitions to cancel both registrations on the grounds of fraud and abandonment through improper assignment in gross.) Sample promo image from Gameologist:Gameologist sued Scientific for marketing lottery tickets to state lottery commissions with various uses of the term “bling.” The court was unimpressed.

Gameologist (and its predecessors in interest) spent a long time attempting to license its mark. In 2002, McGill and another principal attempted to license BLING BLING 2002 to various industries, including the lottery ticket industry. They engaged in discussions with Oberthur Gaming Technologies Corporation, but Oberthur ultimately said no. A year later, Gameologist met with representatives of MDI, a company that licenses popular icons and develops lottery tickets incorporating them. MDI and Gameologist entered into a license agreement effective December 1, 2003, granting MDI rights to use BLING BLING 2002 in connection with lottery tickets. At that time, MDI had been acquired by Scientific, though the parties dispute the exact relationship.

Afterwards, MDI told McGill that state lotteries weren’t interested in the “Bling Bling” concept. Thus, in April 2004, MDI and Gameologist agreed to cancel the license agreement. Gameologist argued that MDI’s reasons for cancellation were pretextual, while Scientific argued that the parties agreed that there was a genuine commercial reason for the cancellation. (With complicated facts omitted: the NY lottery focus tested a “Bling Bling” ticket in September 2003, which had negative results.) In July 2008, Florida also rejected Gameologist’s “Bling Bling” ticket proposal.

So: Gameologist hadn’t successfully entered into any license with anyone but MDI for use of its mark in connection with lottery-related goods or any other goods or services. It never successfully marketed a "Bling Bling" lottery ticket to a state lottery commission or released a product with the "Bling Bling" mark in the lottery industry, nor did MDI do so during the existence of the license agreement.

In 2004, Gameologist made available online a free slot machine game simulation displaying the mark "BLING BLING 2002." In 2006, it produced 500 units of a board game using the mark "BLING BLING 2002 The TAKEOVER Part I." Gameologist's business records indicated that it sold four board games in 2007 at about $30 each. McGill testified that Gameologist sold about half of the remaining units to a small group of retailers in unrecorded transactions in cash and distributed the remainder free of charge as promotional items. This is the only product that Gameologist actually sold featuring the mark "BLING BLING 2002."

Meanwhile: Scientific makes lottery tickets, and have sold several thousand instant lottery tickets to state lottery commissions that feature the word "bling," including a "$50,000 BLING" ticket for the Georgia Lottery; an "IT'S A BLING THING" ticket for the New Hampshire Lottery; a "BLING ME THE MONEY" ticket for the Kentucky Lottery; a "SPRING BLING" ticket for the New Mexico Lottery; and a "$10,000 BLING" ticket for the District of Columbia Lottery. These tickets were developed and launched between 2007 and 2010.Gameologist’s registration for online three dice casino games was incontestable. However, because Gameologist argued that Scientific infringed its mark by using “bling” in connection with lottery tickets, and Gameologist owned no registrations for the mark for lottery tickets, the presumption of an exclusive right to use the mark didn’t extend past the registratered goods/services. Nor did incontestability constitute conclusive evidence of the mark’s validity, because incontestability is conclusive only as to the goods or services specified in the registration. The court therefore found it unnecessary to reach the issue of the validity of the registrations.

Thus, because the registrations didn’t provide presumptive or conclusive evidence of validity, Gameologist had the burden to prove that its mark was valid. (This seems to me a conceptual mistake. Gameologist doesn’t have any burden with respect to the goods or services covered by the registration; the question is whether its rights extend to lottery tickets. This seems to be important given what happens next.)

The parties agreed that BLING BLING 2002 was suggestive as applied to either gaming equipment or lottery tickets. However, Scientific argued that Gameologist hadn’t made sufficient use in commerce to entitle the mark to protection. The court agreed. Four sales of the board game were de minimis (the other alleged sales weren’t proven). Gameologist’s advertising and promotion of the mark wasn’t sufficiently widespread or intensive to count as use in commerce; Gameologist asserted that it attended trade shows, created prototypes, disseminated an “email blast” to the gaming industry, disseminated press releases, and took out ads, but didn’t provide evidence of how widespread its efforts were or what audiences it reached. This wasn’t enough to create a genuine issue of material fact on whether its efforts were sufficiently open and notorious to create source identification. Instead, its use was sporadic, casual or transitory.

This result seems to me a workaround from incontestability, as to which nonuse without abandonment or fraud (both of which are defenses and both of which the court declined to address) isn’t a defense. Should the analysis be different just because the defendant is not using the mark on the registered goods or services? This seems a somewhat odd result. Now, we might want nonuse to be highly relevant to the confusion inquiry, but that would require a different type of analysis (which the court also does, immediately below). Also, what about that pending ITU? Isn’t this nonuse analysis too early in the game, given that Gameologist apparently still has time to file a statement of use?

Turning to more solid ground, the court found that Gameologist hadn’t shown likely confusion.

Gameologist alleged both forward and reverse confusion. Strength: without secondary meaning, suggestive marks are at best moderately strong. Gameologist failed to show much secondary meaning: it didn’t quantify its advertising expenses or show that they produced results; its evidence of unsolicited media coverage was minimal and might have been instead solicited; and it only had evidence of minimal sales.

Attempts to “plagiarize” a mark can raise an inference of secondary meaning, but this factor was at best neutral. Scientific knew about Gameologist’s mark, but there was no evidence they intended to benefit from Gameologist’s goodwill because “the plaintiff was not well-known in the lottery industry and had no reputation or good will on which the defendants were likely to seek to capitalize, given that the plaintiff has never successfully marketed a product in the lottery industry and has only achieved meager sales of its board game.” Nor was there evidence of other third-party attempts to plagiarize the mark that would weigh in favor of secondary meaning.

As for length and exclusivity of use, Scientific showed significant commercial use of “bling” in various industries, including 160 hits on a search for registered marks. Also, Gameologist had only been using the mark for a short time. (Long enough to become incontestable, but not long enough to show secondary meaning!) Thus, secondary meaning weighed heavily against the plaintiff despite the relative conceptual strength of the mark, meaning at best a neutral result for Gameologist. As for reverse confusion, if the court were to consider the strength of Scientific’s mark, that mark is strong (the court is unclear whether this means the house mark Scientific or the various “bling” variants Scientific used, and whether this means conceptually or in the marketplace, though I’m guessing it’s “bling” and conceptually) and so the first factor would weigh in Gameologist’s favor in a reverse confusion claim, but the court said it wouldn’t change the ultimate conclusion on balance. Comment: This is kind of a mess, but then so is reverse confusion; I’d think that suggestive marks aren’t very strong for purposes of reverse confusion analysis—you’d really need an arbitrary or fanciful mark to make your claim persuasive.

The parties’ marks are visually dissimilar. Scientific’s marks incorporated “bling” into phrases, rather than using “Bling Bling” in isolation, and they differed in the overall impression conveyed to consumers. Gameologist’s mark is surrounded by inner-city references: the board game calls itself "The Ultimate Hustler's Game" and describes players as "adventurers in an inner city setting trying to gather up money and properties," and the online slot machine game depicts photographs of cars, scantily-clad women, and stacks of hundred dollar bills. Scientific’s marks didn’t convey the image of a "hustler" nor did they feature any photographs. Instead, they featured drawings of diamonds, flowers, butterflies, and, in one instance, a cartoon of an anthropomorphized lottery ticket. This factor weighed against Gameologist.

Moreover, there was no evidence of direct competition. (Again, this is the case of the ITU that didn’t bark.) “While the defendants produce instant lottery tickets and provide lottery-related services for state lottery commissions, the plaintiff has only produced a board game and an online slot machine game. The plaintiff has never successfully marketed a product to or produced a product for a state lottery commission. Nor is there any evidence that the plaintiff's products … were marketed to a similar clientele or sold in the same distribution channels. The defendants sold their products exclusively to state lottery commissions, which were not the target clientele for the plaintiff's board game or online slot machine.” Nor did Gameologist demonstrate any likelihood that it would enter the lottery industry or that an average consumer would think it likely to do so. While Gameologist’s attempts to solicit state lotteries and engage in licensing indicated its desire to enter the industry, intent is irrelevant unless prospective purchasers would know about it, and here there was no reason to think they did.

Likewise, there was no evidence of actual confusion. Anecdotal, hearsay reports from friends and family members of Gameologist's current or former members didn’t count.

Bad faith: the only relevant intent is intent to confuse, not intent to copy. The latter may justify an inference of the former, but not so much where the defendant would derive no benefit from confusion, as where the plaintiff has no goodwill to exploit. This weighed heavily against an inference of bad faith, as did the fact that the defendants sought out and relied on the advice of counsel in clearing the marks.

Quality of the products: Scientific generally produces high quality products, but Gameologist argued that the Ba-Da-Bling ticket for the NY lottery (the subject of a separate state lawsuit) was offensive to Italian-Americans and African-Americans. The court found Gameologist’s opinion on this point insufficient evidence to raise a genuine issue of material fact that the plaintiff's reputation would be injured by any inferiority in Scientific’s products, so the quality factor was neutral.The relevant consumers were state lottery commissions, which are highly sophisticated, favoring Scientific. Balancing the factors, Gameologist failed to show likely confusion and thus lost summary judgment.

The same defects attended Gameologist’s false advertising claim, which alleged that Scientific’s ads were likely to deceive consumers about the origin and ownership of the marks used in the lottery tickets. This is an implicit falsehood claim and requires extrinsic evidence of consumer deception, which was absent. So too with the common law unfair competition and passing off claims. The court also dismissed breach of contract and related claims relating to the license with MDI because Scientific wasn’t MDI’s successor or in any other way bound by the terms of the license.

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